The spot-next market saw the rupee fall to Rs. 130.99/131.05 against the greenback from an opening position of Rs. 130.95/131.00.
"The difference between the spot and spot-next market is usually 5 cents or so, but now it has shot up to around 40 cents," a dealer said not wanting to be named.
The spot market exchange rate is what is usually quoted in these pages where the settlement dates fall two days after deals have been made. Spot-next deals are closed three days after.
Dollars are quoted at a wide range of Rs. 130.60/131.10 in the spot market but no deals are taking place because the central bank has told dealers not to trade beyond the Rs. 130.60/65 range. So the market has switched to the spot-next floor, dealers said.
Dealers said intervention kept rates steady at the spot-next market with state banks that usually behave as the central bank’s proxy were seen selling dollars on Monday and Tuesday.
Foreign bond sales were not evident yesterday, dealers said.
The central bank last week stopped publishing data for foreign holdings in Treasury bills and bonds separately so as to calm the forex market. The net outflow last week amounted to a negligible Rs. 105 million compared to a less than 1.5 percent of total foreign bond holdings amounting to Rs. 4 billion going out of the country the previous week.
"We do not know why the central bank has stopped publishing the data separately. We can only speculate heavy short term Treasury bill purchases by foreigners after exiting from bonds, like we noticed two weeks ago. True there is no outflow, but it means foreigners are hedging their risks and they are opting for a short term view. Two weeks ago the amounts were small so there is no cause for concern. But, then the central bank stopped publishing the data this time around and who knows what happened, only each bank would have their separate story to tell," one dealer said.
Excess rupee liquidity in the banking sector remained high after the central bank cut the statutory reserve ratio by 200 basis points from July 01 releasing around Rs. 35 to 40 billion into the banking system.
Excess liquidity amounted to Rs. 29.8 billion yesterday compared with Rs. 12.3 billion a month ago.
Call money market rates for interbank overnight borrowings not backed by securities reached 8.71 percent compared to 8.50 percent a month earlier and overnight interbank repo rates for borrowings backed by securities reached 8.16 percent, up from 8.09 percent a month earlier.